January 31, 2012

Click here and here for some excellent links from Jesse at Cafe Americain. He has two great blues songs ready. Groovygirl loves the Blues, especially Robert Johnson!! Listening to Mr. Johnson sing the blues is like laying in a hammock on the front porch on a bright summer day watching a storm slowly roll in from a distance.

And you should be worried too. If any of your money goes thru a brokerage house at any time, it is now at risk.

Unlike the banking industry, where the Federal Deposit Insurance Corp. covers losses up to a limit for depositors, brokerage customers are at the mercy of the Securities Investor Protection Corp., an agency that’s been accused to being either slow to pay, unwilling to pay or both.

That’s why this isn’t just about a bunch of farmers, traders and institutional investors who are on the hook. It’s about the safety of the system — and by all appearances, nothing is safe.

If investors pull money from the brokerage industry, we will have another frozen liquidity problem but much worse than 2008. No liquidity means no credit for regular business activity.

groovygirl says:

The three posts today illustrate exactly how and when the global debt collapse will happen and how it will affect you and your investments. Reread the blog posts.

Jim states in his interview that the ISDA (controlled by the five big US banks, who also hold over 90% of the European debt credit swaps) determines if x% cut on Greece’s debt is technically considered a default. To continue to bury the truth and kick the can down the road, they will not consider it a default, no matter what the percent. But when will Mr. Market not listen to them, consider a default of any % a real default and call in the insurance/hedge? There is no money for the hedge. It is papered over in an emergency and covered in flexible accounting practices on the balance sheets.

This is exactly what happened to MF Global. They got called on their bets of Greek debt in a 50% haircut, not official default. The swaps were called in, but there was no insurance to cover the bets because it was not an official default. The only money in MF Global to cover a part of the bet was customer money. This money was stolen from pension funds, investors, non-big banks, and hedge funds to cover the other side of bets at the Big Five (in this case mainly JPM and GS). The customers will never see that money again.

As the European debt defaults, regardless of whether they call it a default or not, the bets will slowly be called in. The Big Five Banks will be covered by QE to infinity, but what about the other MF Globals out there? The small investors? The pension funds? Their money will be stolen just like the MF Global situation. MF Global was a test crime for the really big heist coming down the road.

Now I suspect that the Fed can paper over these losing bets for a while with only smaller entities going under. But when Martin Armstrong’s Economic Model calls for a peak on October 1, 2015 and this is also a peak year in the panic cycle, groovygirl would say QE can’t paper over the problem past 2015.

It is all right there. Exactly how it will happen and how QE will continue until it can’t anymore and how the Big Five Banks will be the only ones standing with everyone else’s money.

Am I saying that the entire US brokerage industry will be wiped out? No. Can we know which ones before hand? I don’t know. This is a new risk that no one is talking about. How can you protect your investments moving forward?

If you have to use a brokerage house, no rehypoteacation, hold only paper stock certificates. Have physical gold and silver outside the brokerage trading system and the banking system. Hold treasuries through treasurydirect, not a broker. If you trade, understand you may lose that money, make it a small part of your total investments. It is NOT insured and the system is now set up to steal it from you under the guise of the Global Debt Crisis and Collapse.

The scenario above is separate from any devaluation or revaluation of the US dollar and a loss of purchasing power. What is listed above is the risk to investments touched by the brokerage industry strictly from the implosion of debt, specifically Europe.

Click here for Martin Armstrong’s latest release entitled Sovereign Debt Crisis: When? dated January 30, 2012 (3 pages). He has a chart of the Economic Confidence Model on page 2. Mr. Armstrong still sees 2015 as the key year for thing to get really dicey.

Click here for a very important interview from Jim Sinclair. Media blackout on final swaps arrangement of Greece of the Big Five US Banks. VERY IMPORTANT, LISTEN TWICE.

ISDA will declare a default not a default. It seems this will be the blueprint for the future “defaults” of European country. This is how MF Global went broke, because a default was not a default, so insurance/hedge didn’t kick in. Who will be next? Will it be this time around? Next “default”?

More liquidity coming, QE to infinity. Benefit to equities and gold, bad for dollar. At some point, the default will have to be called a default and the insurance/hedge will be called in, but there will be no money. We just got closer to the end game.

January 30, 2012

Click here for Bill Moyers’ third of five series on Big Banks and the Financial Collapse entitled How Big Banks Are Rewriting The Rules Of Our Economy. Another great investigative report from Mr. Moyers and his team. The interview with John Reed, former Citigroup Chairman of the Board, is worth watching alone. If you remember, the Citigroup merger was the reason for the dismissing of Glass-Steagall.

The true irony here is the Mr. Reed’s father lost his entire savings in the bank failures of the 30’s and he said that his father would die again if he knew he was working for a bank. No, I think his father is turning over in his grave because the deal his son was involved in negating all safeguards to protect saving accounts, and now, 401ks and IRAs as well. Oh, the irony! Mr. Reed says “We got carried away.” No one will take any responsibility for anything. It’s the American way.

The best part of the show was at the end, when Bill responds to an email from a viewer regarding last week’s show. Groovygirl has a renewed hope in America news reporting. Mr. Moyers responded that his job is to report what has/is happened, not modify his story to get a party elected or not elected. It seems Mr. Moyers has grasped the reality of the situation, we are way beyond political parties saving the day.

Click here for an update on the MF Global crime scene. Macavity…..he’s not there.

Missing funds, now not missing, but vaporized. Could be more than $1.2 billion. Surprised?

Because money simply vaporizes. Which means one of two things: i) the “vaporization” is merely the phrase that so called investigators use to avoid the far more troubling sounding “stolen” as it would imply guilt, something which the former NJ governor and Goldman CEO (and not to mention JP Morgan which most likely was on the receiving end of the $1.2 billion + transaction) will, under guidance from counsel, sternly disagree with, or ii) the capital markets are such an unprecedented and manipulated fraud, that nobody has any clue at any moment, where any client money is, and that any residual capital still “invested” in mythical representations of “assets”, which are likely rehypothecated so many times, that not even Bank of America’s robosigning division would have a clue where to start unraveling, will promptly be converted into tangible manifestations of capital. So when someone asks what happened to stock market volume, and to investor confidence in the “stock market” feel free to use just that phrase: “it vaporized.”

Although, Mr. Ben says there is no inflation and is keeping rates near zero until 2014, groovygirl begs to differ.

GG has been doing some financial dissecting of her bills the last 3 years. Some conclusions of her personal experiences:

Food is up 30%

Utilities (including water) are up 15%

Out of pocket health expenses (co-pays and Rx) are up 43%

Upon further dissecting, even if the cost of unit of utility was the same or only slightly higher on average, the fees and taxes went up. Groovygirl has mentioned this before. Even if we should have a sudden deflation in all energy commodities (but gg thinks not), US infrastructure major maintenance costs and federal, state, and local demand for fees and taxes will make living expenses go up.

Mr. Bernanke may not call that inflation, but groovygirl does. Especially when you are making .01% interest on cash in the bank.

– Net of Involuntary Inventory Build-Up, GDP Growth Was 0.8% Instead of 2.8%
– Durable Goods Orders and New Home Sales Still Show Stagnation
– Fed’s New PCE Inflation Target Is Inconsistent with Plans for Ongoing Easing

Final revised GDP is 1.7%. Click here. Just a reminder than the US bank “stress tests” required at least 2%, which after final “revisions”, we haven’t seen.

Some good interviews over at KWN with Gerald Celente and Jim Rickards.

Burning talks about Neil Howe’s work on generational theory, mass propaganda and perception. It is a long post, but very interesting.

A snippet:

Neil Howe is an expert on interpreting how generations react to events. I expected him to be impressed by the courage and fortitude of the Millenials leading this protest against Wall Street gluttony and audacious criminality. This is the new GI Generation and I anticipated him perceiving these protests as a prelude to greater feats ahead by this generation. Instead he described them as naive adolescents being led down a phony path by anarchist Boomers. As an example he referenced the fact that many of the protestors were wearing Guy Fawkes masks, the most famous anarchist in history. He found this distasteful and dangerous. My interpretation of the Guy Fawkes masks was more in line with the movie V For Vendettaand the theme of a corrupt evil government keeping the public living in perpetual fear.

Neil Howe’s impression of the movie centered on the terroristic aspects of blowing up Parliament, not on the symbolism of citizens rising up and casting off the yoke of a malevolent oligarchy that has used propaganda, fear and intimidation to manipulate and control the population. Howe is a Baby Boomer and I’m Generation X. We are each viewing the Occupy Movement through the prism of our life experiences and perceptions about the intentions of these protestors. The existing social, economic, and political structure is dominated by Boomers. Neil Howe views the Occupy Movement as a threat to the system he believes in and supports. As a cynical Xer with no allegiance to a corrupt government, a crony capitalist economic system or a greedy self centered society, I see these young revolutionaries as our last great hope.

Lots of true stats and proof of the propaganda in Burning’s link. Excellent read!

Side musing: groovygirl found it odd that a sociologist and studier of history like Mr. Howe was so bias.

On another side note, gg finds it very interesting that Ron Paul is invisible again. Even after taking the majority of the independent vote and the under-30 vote in NH. This demographic represents the swing voter and will be the major influence in this election. Will split the vote or not vote at all if Paul is not on a ticket? I don’t think we have seen the real impact yet of Dr. Paul’s ideals, since the focus is on the Republican vote only at the moment.